Capacity Requirements Planning (CRP)

Capacity Requirements Planning (CRP): A Comprehensive Guide for CPIM Exam Success

Introduction to Capacity Requirements Planning (CRP)

Capacity Requirements Planning (CRP) is a critical component of manufacturing planning and control systems. It serves as the bridge between what you plan to produce and whether you actually can produce it. Within the CPIM body of knowledge, CRP falls under the domain of Internal Supply Sources and is essential for ensuring that your Material Requirements Plan (MRP) is feasible from a capacity standpoint.

Why is CRP Important?

CRP is important for several key reasons:

1. Validates the MRP: MRP assumes infinite capacity — it calculates what materials are needed and when, without considering whether the work centers can handle the load. CRP provides the reality check by comparing the planned workload against available capacity.

2. Prevents Overloading and Underloading: Without CRP, work centers may be overloaded (leading to missed due dates, overtime costs, and worker fatigue) or underloaded (leading to idle resources and wasted costs). CRP helps identify these imbalances in advance.

3. Supports Realistic Scheduling: By identifying capacity constraints before orders are released, planners can take corrective action — such as adjusting schedules, adding overtime, outsourcing, or shifting work between periods — to maintain realistic and achievable production plans.

4. Improves Customer Service: When production plans are feasible, delivery commitments are more reliable, leading to higher customer satisfaction.

5. Hierarchy of Capacity Planning: CRP is the most detailed level of capacity planning. It sits below Resource Requirements Planning (RRP) and Rough-Cut Capacity Planning (RCCP) in the planning hierarchy, providing the most granular view of capacity needs.

What is Capacity Requirements Planning (CRP)?

CRP is a detailed capacity planning technique that determines the amount of labor and machine resources required to accomplish the tasks of production as dictated by the MRP. It converts the planned order releases and scheduled receipts from MRP into hours of work by work center and by time period.

Key Definitions:

- Capacity: The capability of a worker, machine, work center, plant, or organization to produce output per time period.
- Available Capacity: The capacity of a system or resource that is available for production, considering factors like number of machines, hours per shift, number of shifts, efficiency, and utilization.
- Required Capacity (Load): The total amount of work scheduled for and arriving at a work center in a given time period.
- Load Profile: A graphical or tabular representation of the load on a work center over time, compared to available capacity.
- Infinite Loading: CRP typically uses infinite loading, meaning it calculates the full load without limiting it to available capacity. The planner then resolves any overloads.

How Does CRP Work?

CRP follows a systematic process to convert MRP output into capacity requirements. Here is a step-by-step breakdown:

Step 1: Gather Inputs

CRP requires several key inputs:
- Planned order releases from MRP (orders not yet released to the shop floor)
- Scheduled receipts (open shop orders already on the shop floor)
- Routing files: These define the sequence of operations, the work centers involved, and the setup and run times for each operation
- Work center data: Number of machines or workers, number of shifts, hours per shift, efficiency, and utilization rates
- Shop calendar: Defines working days and available hours per period

Step 2: Calculate Required Capacity (Load)

For each planned and open order, CRP uses the routing file to determine:
- Which work centers are needed
- How much time (setup + run) is required at each work center
- When the work is expected to arrive at each work center (using backward scheduling from the due date or forward scheduling from the release date)

The formula for calculating load at a work center for a given order is:

Load (hours) = Setup Time + (Run Time per unit × Order Quantity)

This load is then placed into the appropriate time period (time bucket) based on scheduling logic.

Step 3: Determine Available Capacity

Available capacity for a work center is calculated as:

Available Capacity = Number of Machines (or Workers) × Hours per Shift × Number of Shifts × Utilization × Efficiency

Where:
- Utilization = (Actual hours worked / Available hours) — accounts for downtime, breaks, maintenance
- Efficiency = (Standard hours produced / Actual hours worked) — accounts for worker or machine performance relative to standard

Rated Capacity (also called Calculated Capacity or Nominal Capacity) = Available Time × Utilization × Efficiency

Demonstrated Capacity is an alternative measure based on historical actual output, often calculated as an average of recent periods.

Step 4: Compare Load to Capacity

CRP produces a load profile (also called a capacity requirements report or load report) for each work center. This visually or numerically compares:
- Required capacity (load) per time period
- Available capacity per time period

Periods where load exceeds capacity are overloaded. Periods where capacity exceeds load are underloaded.

Step 5: Resolve Imbalances

When overloads or underloads are identified, planners have several options:

To address overloads:
- Schedule overtime
- Add shifts
- Subcontract work
- Use alternate work centers or alternate routings
- Shift work to earlier (underloaded) time periods
- Split lots
- Revise the MRP (change due dates, lot sizes, or priorities)

To address underloads:
- Reduce shifts or hours
- Pull work forward from future periods
- Reassign workers to other areas
- Schedule maintenance or training during idle time

Important Note: CRP itself does not automatically resolve capacity problems. It is an informational tool that highlights issues for the planner to address. The planner must take action.

Key Concepts to Master for the Exam

1. CRP vs. RCCP
- RCCP is a higher-level, less detailed capacity check done against the Master Production Schedule (MPS). It uses simplified methods like capacity planning using overall factors, bills of labor, or resource profiles.
- CRP is a detailed capacity check done against MRP output. It uses full routing data and provides work center-level, time-phased capacity requirements.
- RCCP validates the MPS; CRP validates the MRP.

2. Infinite vs. Finite Loading
- CRP uses infinite loading: it places all required work into time periods regardless of capacity constraints, then highlights overloads for manual resolution.
- Finite loading (or finite capacity scheduling) automatically limits the load to available capacity by shifting work to other periods. This is a different technique, not traditional CRP.

3. Backward vs. Forward Scheduling in CRP
- Backward scheduling: Starts from the order due date and schedules operations backward. This is the most common approach.
- Forward scheduling: Starts from the order release date and schedules operations forward. Used when orders are already late or when rescheduling.

4. Inputs to CRP
Remember the key inputs: MRP planned orders, open shop orders, routing files, work center files, and the shop calendar.

5. Outputs of CRP
The primary output is the load profile (load report) for each work center, showing load vs. capacity by time period.

6. Role of the Planner
CRP is a decision-support tool. The planner must interpret the load profiles and take corrective action. CRP does not make decisions automatically.

7. Relationship to the Planning Hierarchy

The capacity planning hierarchy mirrors the production planning hierarchy:
- Production Plan → Resource Requirements Planning (RRP)
- Master Production Schedule → Rough-Cut Capacity Planning (RCCP)
- Material Requirements Plan → Capacity Requirements Planning (CRP)
- Production Activity Control → Input/Output Control

Each level becomes more detailed and covers a shorter time horizon.

8. Lead Time Elements in CRP
CRP considers all elements of manufacturing lead time when scheduling operations into time buckets:
- Queue time (typically the largest component)
- Setup time
- Run time
- Wait time
- Move time

However, only setup time and run time consume capacity (generate load). Queue, wait, and move times are elapsed time only and do not create load at a work center.

Exam Tips: Answering Questions on Capacity Requirements Planning (CRP)

Tip 1: Know Where CRP Fits in the Hierarchy
Many exam questions test whether you understand the planning hierarchy. Remember: CRP validates the feasibility of the MRP, not the MPS (that's RCCP) and not the Production Plan (that's RRP). If a question asks which technique validates detailed material plans at the work center level, the answer is CRP.

Tip 2: Remember CRP Uses Infinite Loading
A common exam trap is to suggest that CRP automatically adjusts the schedule to fit within capacity. It does not. CRP uses infinite loading and simply reports overloads and underloads. The planner resolves the issues.

Tip 3: Distinguish Between Load and Capacity
Load is the required hours of work. Capacity is the available hours. CRP compares the two. Exam questions may ask you to calculate one or both. Know the formulas:
- Load = Setup Time + (Run Time per unit × Quantity)
- Available Capacity = Machines × Hours/Shift × Shifts × Utilization × Efficiency

Tip 4: Only Setup and Run Time Create Load
If a question presents all five elements of lead time and asks what creates load (capacity requirements), select only setup time and run time. Queue, wait, and move time are important for scheduling but do not consume work center capacity.

Tip 5: Know the Inputs and Outputs
If asked what inputs CRP requires, look for: MRP planned order releases, scheduled receipts (open orders), routing files, work center data, and the shop calendar. The key output is the load profile or load report by work center.

Tip 6: Understand Demonstrated vs. Rated Capacity
- Rated (calculated) capacity uses the formula: Available hours × Utilization × Efficiency
- Demonstrated capacity is based on actual historical output
- Exam questions may ask which is more reliable or how they differ. Demonstrated capacity reflects real-world performance and is often preferred for planning.

Tip 7: Watch for Action-Oriented Questions
When a question presents an overloaded work center and asks what to do, think through the corrective actions: overtime, alternate routings, subcontracting, lot splitting, shifting work to earlier periods, or revising the MPS/MRP. Avoid answers that suggest CRP will fix the problem on its own.

Tip 8: Understand the Feedback Loop
CRP may reveal that the MRP (and therefore the MPS) is not feasible. In this case, the feedback loop goes back to revise the MPS or even the production plan. This iterative process ensures plans are realistic before execution begins.

Tip 9: Don't Confuse CRP with Input/Output Control
CRP is a planning tool used before orders are released. Input/Output Control is an execution tool used during Production Activity Control (PAC) to monitor actual input and output at work centers against planned levels. If the question mentions monitoring actual shop floor performance, it is likely referring to Input/Output Control, not CRP.

Tip 10: Practice with Calculations
Be comfortable with basic CRP math. For example:
- If a work center has 2 machines, operates 8 hours/shift, 2 shifts/day, with 90% utilization and 95% efficiency, rated capacity = 2 × 8 × 2 × 0.90 × 0.95 = 27.36 hours/day.
- If an order for 100 units has a setup time of 1 hour and a run time of 0.1 hours/unit, the load = 1 + (0.1 × 100) = 11 hours.

Summary

Capacity Requirements Planning is the detailed mechanism that ensures your material plan is achievable with available resources. It takes the output of MRP, applies routing and work center data, and produces load profiles that highlight where capacity imbalances exist. As a planner, your job is to use CRP output to make informed decisions — adjusting capacity, rescheduling work, or revising plans — to ensure smooth and efficient production. For the CPIM exam, focus on understanding CRP's place in the planning hierarchy, its inputs and outputs, the difference between load and capacity, and the role of the planner in resolving capacity issues. Mastering these concepts will prepare you to answer CRP questions with confidence.